Monetary policy and asset prices in the euro area since the global financial crisis

Christophe Blot (), Paul Hubert and Fabien Labondance

Revue d'économie politique, 2020, vol. 130, issue 2, 257-281

Abstract: This paper assesses the non-linear effects of monetary policy in the euro area since the global financial crisis on both asset prices and their imbalances component, for the stock and housing markets. We compute these imbalances as the difference between asset prices and a benchmark value that we approximate with fundamentals in a discounted cash-flow model, the fitted value of asset prices in a data-driven model or the trend in a standard trend/cycle filtering model. We find that ECB monetary policy has affected both stock and house prices in the euro area since 2008. However, we show that monetary policy influences stock price imbalances but not house price imbalances. Exploring further the mechanism, we find that this response of stock price imbalances is driven by central bank information shocks, not by pure policy shocks.

Keywords: booms and busts; mispricing; asset price imbalances; European Central Bank (search for similar items in EconPapers)
Date: 2020
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